You'll notice that up through the 40s it was possible for inflation to go negative and for there to be deflation. That means that while prices would rise for a

You'll notice that up through the 40s it was possible for inflation to go negative and for there to be deflation. That means that while prices would rise for a time, they would then fall for a time. That made borrowing less attractive since there wasn't an implicit guarantee that you'll pay back the loan with money worth less than what was loaned to you. In other words, get $X buying power now, pay back $0.8X buying power over time. It's a slam dunk. After the 40s (and the war) there was a brief flirtation with deflation and then by the 60s inflation was in full force. Eventually people realized this was happening and a few years later Nixon nixed (HA!) the gold standard here in the US. Once that happened it became incredibly obvious that inflation, borrowing and not really paying for it was the new standard move if you had half a brain. Businesses got it very quickly. Most of the population in the US has yet to realize it, otherwise it would have been changed by now. EDIT: Given the regular changes to the way CPI is calculated I'm not sure I entirely agree with the reported numbers. I suspect that they're actually a few percent higher, so inflation has probably averaged not 4% for the last 30 years, but more like 6-7% 1.04 ^ 30 = 3.24 1.07 ^ 30 = 7.61 If that were the case it would explain a lot of the inequality. If inflation is 6-7% and returns have been averaging 8% (this is what most pensions assume they can get and shoot for) then your real rate of return is a pittance, almost not worth mentioning. Might that also cause some hard to detect but definitely real inequality as well?